Tax
Capital Gains Tax: Short-Term vs Long-Term Rates
When you sell an investment at a profit, you owe capital gains tax. But the rate you pay depends heavily on how long you held the asset — and understanding this can save you a significant amount.
Short-Term vs Long-Term Capital Gains
| Short-Term (<1 year) | Long-Term (1+ year) | |
|---|---|---|
| Tax Rate | Ordinary income rate (10–37%) | 0%, 15%, or 20% |
| On $10,000 gain (24% bracket) | $2,400 | $1,500 (15% rate) |
2024 Long-Term Capital Gains Rates
| Taxable Income (Single) | Long-Term Rate |
|---|---|
| $0 – $47,025 | 0% |
| $47,026 – $518,900 | 15% |
| Over $518,900 | 20% |
If your taxable income is under $47,025 as a single filer, you pay 0% on long-term capital gains. This creates a powerful tax-planning opportunity for early retirees and low-income years.
How to Minimize Capital Gains Tax
- Hold investments for 1+ year — qualifies for lower long-term rates
- Tax-loss harvesting — sell losers to offset winners
- Use tax-advantaged accounts — no capital gains in 401(k) or IRA
- Donate appreciated assets — avoid gains by donating to charity